Red tape the big hurdle for the mining industry

This week theMining Business Outlook 2016 by Newport Consulting outlined the challenges and opportunities facing 50 of Australia’s most prominent mining leaders.

The report demonstrated beyond a doubt that cutting unnecessary red tape on mining is essential if governments are concerned about the future growth and prosperity of Western Australia.

A quarter of respondents to Newport Consulting cited red tape as a critical area for government to act.

This comes after Gina Rinehart’s comments last week that Australian politicians don’t have the guts to cut red tape.

The scope of Australia’s red tape problem is difficult to grasp because it stems from many different regulators and is made up of thousands of different pages of legislation.

However, Institute of Public Affairs research has found that red tape costs the Australian economy as a whole at least $176 billion dollars every year in foregone economic output.

That means if red tape were an industry, it would comprise a larger portion of our economy—11 per cent of GDP—than any other industry.

One of the most telling impacts of our red tape problem is how it impacts new mining projects. Those mining companies prospecting, investing and seeking new opportunities spend a remarkable amount of time and money dealing with government.

One prominent example is the Roy Hill Iron Ore project by Hancock Prospecting, which had to work through over 4,000 government licenses, approvals and permits before production even began. Many of these obligations are duplicated across jurisdictions, especially between state and federal governments.

According to the government’s registry, Australian businesses and individuals are now burdened by over 30,000 licenses, permits and approvals. Small and big businesses spend more and more of their time complying with red tape, taking their attention off serving their communities.

This red tape burden leads to serious delays in getting projects up and running. In 2012, research for the Minerals Council of Australia by Port Jackson Partners found that Australian thermal coal projects experienced 1.3 years’ additional delay relative to the rest of the world.

Every minute our mining companies spend pandering to government is a minute they don’t spend hiring an additional employee, or discovering new innovative and efficient processes.

The costs of compliance activities only seem to be getting worse. A Deloitte Australia report estimated that in 2006 the mining workforce spent 7.6 per cent of its time undertaking compliance activities. By 2011 that number had increased to 8.9 per cent.

It’s no wonder Australia is in the bottom half of the world in terms of the burden of government regulation in the World Economic Forum’s Global Competitiveness Report. We now sit behind many of our major competitors including the United States, Singapore and China.

Australia cannot afford an international reputation of regulatory complexity and onerous government control. Australian governments should be facilitating our miners to compete in global markets and export our high quality resources.

To be clear, unleashing Australia’s miners into a new era of prospecting, investment and innovation doesn’t mean removing all licenses and permits. It means cutting out the wasted time and money spent on compliance benefitting no one but bureaucrats.

Indeed, as the Productivity Commission noted in 2013, many environmental processes could be ‘greatly reduced without lowering the quality of environmental outcomes’.

If it is successful, the Western Australian government’s new red tape reduction plan – the #ShredTheRed campaign – will drive growth. The plan includes a dedicated parliamentary repeal week, where for one week parliament is restricted to cutting red tape, rather than passing new rules and regulations.

But there is a risk with these sorts of plans. The WA government will have to work hard to maintain its momentum. It needs to continue to lift unnecessary red tape burdens on business long after those weeks are over.

Governments need to free the resources industry to employ, grow and compete. Cutting mining red tape will not only lead to higher investment, encourage innovation, and stimulate employment. It will unleash Australian prosperity for years to come.

Darcy Allen is a research fellow at the Institute of Public Affairs. This piece was originally published in the West Australian.